“The balance sheet is the company’s thermometer. It lets you know whether you’re healthy or not.”
Jack Stack
A snapshot of what the firm owns and how it is financed
We have put a three-line equality in the balance equation to indicate that it must always hold, by definition.
Assets = Liabilities + Equity
Assets = Stuff we have and own. But, where did we get the money to buy those assets?
Liabilities = Borrowed money
Equity = Owners put money back into the company
The balance sheet states what the firm owns and how it is financed. It is a snapshot on a particular date, as though the firm stood momentarily still. The balance sheet has two sides: Assets on one side, and the liabilities and shareholder equity on the other. It is always included in a publicly traded company’s financial statements. Go here to look at the other financial statements, like the statement of cash flows. And if you need to brush up on assets, liabilities and shareholder equity visit this post.
Check out Amazon’s balance sheet provided by CFI here:
